Bengaluru, Sept. 5 -- Global brokerage firm CLSA has cautioned that Q2 FY26 may turn out to be one of the weakest periods for banks in recent years, citing sequential pressure on net interest margins (NIMs) and stress in certain asset-quality segments.

The firm expects loan growth to stay subdued through September but notes that some signs of recovery could emerge thereafter. NIMs are projected to improve gradually, supported by the Reserve Bank of India's (RBI) cut in the Cash Reserve Ratio (CRR) and the repricing of term deposits.

CLSA estimates that deposit costs may decline by around 5 basis points each quarter over the next six to seven quarters. While pressure in unsecured retail loans is expected to ease in the second half of the...